Users favor bigger players in shrinking market

Von Rodney Gedda

With mergers and acquisitions causing vendor numbers to shrink faster than pop star Michael Jackson"s fan base, the pressure is on IT managers to revise their procurement strategies to keep pace with industry consolidation.

The fear their provider could be caught in the current M&A merry-go-round leaves IT departments with little choice but to favor the big players. A Hewlett-Packard and StorageTek customer Tweed Shire Council CIO Russ Merry is the victim of two mergers.

Merry ditched HP after it merged with Compaq and now faces an uncertain future with its StorageTek tape backup system following news of its acquisition by Sun Microsystems.

Before the HP-Compaq merger in 2001, the council had a large number of HP servers which IBM"s Intel-based xSeries systems have gradually replaced. Merry said that, before the merger he received a consistently high level of support from HP.

"Support wasn"t at the same level after the merger, also price and product availability were always going to be significant factors in the shift to alternate vendors," he said.

"All hardware was on a lease cycle and we could not afford supply delays in replacing and returning equipment.

"After the merger there was less choice [because] previously both companies were offering similar products.

"We found that the move to IBM provided cost benefits and performance and support has been good. IBM also gives us consistency across our network."

The council did run Oracle on a Sun Unix machine but it was decommissioned in favor of Microsoft SQLServer on Wintel.

The last Unix machine, a HP-UX system, will be switched off next month and its application will also be migrated to Wintel.

If the upheaval associated with the HP-Compaq merger wasn"t enough for the council, it is now keeping a close watch on Sun"s StorageTek acquisition. The council"s systems administrator Marcus Armour said he can"t comment on how much relevance Sun has in the market these days, but "any major concern for council would be for ongoing support of existing products".

"Sun is trying to diversify [but] it"s not for me to understand the logic or strategies behind it," Armour said. "We"ve been through mergers in the past and when HP-Compaq happened we were concerned about service levels."

In September 2000 Sun acquired server marker Cobalt Networks in a $2 billion stock swap. Cobalt is no longer in existence.

According to Merry, the council now favors larger vendors as "acquisitions steer you in that direction".

Alan Stainlay, IT director at food and hospitality services provider, Bidvest shares Merry"s sentiment.

"Try to stick with big vendors to make sure they will be around," Stainlay said. "There is a level of certainty with smaller vendors."

That said, Stainlay believes engaging specialty technology providers is not a bad policy, particularly when it ensures more than one vendor can supply the product.

Bidvest"s ERP software vendor Evolve360, was snapped up by the Meier Technology Group in May.

However, because Meier has been around a while and the software is fairly self-sufficient, Stainlay wasn"t phased by the deal.

"It"s not a train smash, just an interruption," Stainlay said, "nothing like being left out on a limb."

Stainlay has also standardized on IBM hardware, as chances are it"s unlikely to be an acquisition target.